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The big four banks and private health insurers are surging, leading strong share market gains on the back of the Morrison Government's predicted re-election.

Key points:

The Australian share market's ASX 200 index was up 1.6pc by 2:00pm (AEST) to reach an 11.5-year high

Banks, property companies and health insurers are leading the gains, with double-digit rises for Medibank Private

The Australian dollar has gained around half a cent from recent three-year lows

The ASX 200 share index closed 1.7 per cent higher at 6,476 — its highest level since late-2007, when the global financial crisis was brewing, and just below its record high.

The market was driven higher by strong gains for the financial sector.

Analysts said the banks were gaining ground because some of Labor's policies would have had the potential to dent their earnings, such as limiting negative gearing, reducing the capital gains tax discount, the possibility of higher bank levies and tougher restrictions on mortgage brokers than proposed by the Coalition.

"The return of the Coalition represents continuation of the status quo, with few policies outlined in the course of the election that would impact the banks directly (with the exception of the First Home Loan Deposit Scheme, which could provide modest support to house prices)," noted analysts at JP Morgan.

The analysts noted that the potential for negative consequences from Labor policies were already priced in ahead of the election, due to polls overwhelmingly pointing to an ALP victory, and have today been unwound.

Westpac was leading the gains for the big four, up 9.2 per cent to $27.75, while the rest of the big four were up between 6 and 8 per cent.

Mortgage brokers were also breathing a sigh of relief, with the Coalition not adopting the banking royal commission's recommendation to end trailing commissions and limit other commission payments. Mortgage Choice was up 14.5 per cent to 91 cents.

The property sector also emerged from the election as a winner, with the threat of negative gearing restrictions removed — listed real estate agency McGrath jumped 19 per cent to 25 cents.

Private health insurers were another sector to see strong gains, with Medibank up 11.5 per cent and NIB up 15.8 per cent, as investors breathed a sigh of relief that Labor proposals to limit premium increases to 2 per cent per annum for two years would not be implemented.

NIB's chief executive Mark Fitzgibbon is the brother of Labor frontbencher Joel Fitzgibbon, who faced a scare in his previously safe seat of Hunter, with a 10 per cent two-party preferred swing towards the Nationals and a large One Nation vote slashing his margin to 2.5 per cent.

A Labor government 'was engendering concern'

Ahead of the market open, JP Morgan's analysts tipped the surge in share prices due to a range of Labor policies that were seen as a negative for investors.

"From a market perspective, the prospect of a Labor government was engendering concern on a range of fronts: margin compression (higher wages); further pressure on house prices (negative gearing and capital gains discount changes); asset and sectoral re-allocations (franking credits); and further pressures on the banks (increased levy, royal commission recommendations)," they wrote.

"While there is scant evidence at the index level of burgeoning political fears — ASX 200 year to date performance is the best in over 25 years — it would, nevertheless, surprise us if there wasn't a market rally in the wake of this unexpected turn of events."

Across the broader market, the removal of the possibility that Labor might end franking credit refunds means that wealthier retirees are likely to keep more of their savings in shares to benefit from a share of the $6 billion in cash returns from the Tax Office.

Asked whether today's rally would prove sustainable in the face of global headwinds and a slowing domestic economy, CMC Markets analyst Michael McCarthy was optimistic the ASX could finally reach a fresh record high, 12 years after its last peak.

"There certainly remain global concerns for markets — in particular the trade dispute between the US and China is dragging on sentiment," he acknowledged.

"But the Australian market has underperformed, generally speaking, over the decade since the GFC.